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Financial Systems

Transprudentiality

Complementary
Ecosociopsychonomies
Why Capitalism Needs Them

 

Transprudential Portfolio Diversification

 

Joseph Edozien
Cape Town
South Africa

 

Structure of Ideas
I. Futurenomic Transdisciplinarity of Ecosociopsychonomics
II. Trans-Systemic Risk-Management for Ecosociopsychonomic Futures
III. Transprudentiality for Transprudential Portfolio Diversification
IV. Self-Referentiality for Self-Referential Super-Financial Sky-Scraping
V. Systemic Unemployment engendering Systemic Deflation of Capitalisms
VI. Inter-Systemic Complementarity of Complementary Ecosociopsychonomies
VII. GEIST!

 

Introduction

This document may seem to some degree to be somewhat technical, but I assume this is not a lay audience and so have also assumed a degree of background knowledge in the presentation of its ideas.

The perspective taken in this document may likely be very unusual for this audience and quite challenging in at times uncomfortable ways in the sobering issues it raises and addresses frankly. But I humbly ask that you seriously consider the thoughts contained herein with an open mind as the issues discussed may possibly become truly important to you given your great and grave public responsibilities to our world at this moment in time.

At this moment in world history, given your powerful background financial roles in our world, your decisions and actions will without any doubt have a more determinative effect on human destiny than you may realize.

You are very important and significant personages, even if not placed on newspaper front pages, and this is why I have taken the time and effort to address you in such a full and honest way without unnecessary varnish and politesse on the world issues I am raising here.

It is difficult to deny, and very much in line with compelling evidence to reason, that finance in the present phase is the most powerful practical motive force in our current human world.

This message will focus on how we may prudently and commonsensically mitigate the risks implicated in the returns we seek so we may even in the worst case outcome of our endeavours at the very least achieve a reasonably balanced and liveable outcome acceptably consistent with our driving desires.

We have a world to make, yes; but it is also a world we share . . .

Our general task here is how best, or most optimally, to Invest Public Funds in a Potentially Persistent Low-Return Environment of possibly unknowable duration.

Given my general views, which are probably well-known to some of you, I will be most interested in addressing this subject from the perspective of global collaboration for global opportunities and global solutions in what may appear to be unconventional asset classes from the point of view of conventional investment strategies because these would be asset classes peculiarly in the general global public interest.

Thus, my general thrust will be toward Innovative and Unconventional Adjustments to Investment Strategies in Response to The Prevailing Low-Return Environment.

My sense is that this approach, even if perhaps somewhat unusual for you, would nevertheless be of at least some relevant interest to you at this moment in time.

In light of this, I will be looking at Innovative and Unconventional Approaches to Asset Allocation, Portfolio Construction, and Risk Management in The General Global Public Interest.

Again, I will be approaching this more from the point of view of global collaboration, in other words, a pooling of funds and resources and interests of public funds and central banks around the world to address some very large global issues, than from the point of view of the limited interests of any one particular public fund or central bank.

I am interested in opportunities and solutions in the general global public interest.

Given the direction of my thinking, it is natural that I will be considering matters relating to specific global public sector considerations in the design of incentive structures for public funds and central banks, processes and techniques for the active management of public funds and central banks, and organisation and governance of the investment functions at public funds and central banks, sovereign wealth funds, and public pension plans.

These considerations would be generally in line with your special interests.

Given specifically that I will be looking at Globally Pooled Public Fund and Central Bank Investment in Innovation in Unconventional Asset Classes in The General Global Public Interest, it is inevitable that I will be also be considering new approaches to the construal of global risk.

Therefore, I will be touching on some other specific subjects of your particular interest such as risk budgeting techniques for active management, risk control versus risk management in the context of an active management, and especially the use of derivative and hedging instruments to provide financial solutions to public investors.

Obviously, I will not be going into detail on these subjects in one message but it reasonably ought to lead to further more detailed work in the area.

Given the limited space and focused scope of a single message, my limited objective is to introduce a structure of ideas that will lead to further work in elaboration and implementation.

As mentioned above, I will not aim to detail these ideas: just to introduce them coherently enough in a sufficiency for clarity but not a sufficiency for programmatization without considerable further work in elaboration for implementation.

However, it is obvious to me that the global Bank for International Settlements ought to play a central part in helping to facilitate and coordinate such further work if it proves to be of sufficient timeliness and interest to you.

The Bank for International Settlement’s remit, reach, and concerns are global and it has an explicit institution organizing primary concern for financial, economic, and general stability on a world-scale.

Global Collaboration for Global Solutions as Global Innovation Opportunities in The General Global Public Interest employing “Unconventional” Global Asset Classes.

Those are my guiding words for this message.

I will trust that the general thrust of the ideas and proposals below will prove to be something worthy of your serious and favourable consideration.

Most Respectfully,
Joseph Edozien

 

Abstract

The perspective taken here is transystemic, transdisciplinary, and transprudential.

The essential factors considered in Ecosociopsychonomics are a structurally interconnected web of four basic systems which serve inextricably together as the experiential foundation and context for human action and destination:

1. Environmental Ecosystems
2. Sociocultural Systems
3. Psychobehavioural Systems
4. Economic Systems

 

These basic factors cannot truly, or ultimately genuinely productively, be considered in isolation from each other.

Everywhere around the world, within and between and around capitalist economies, and in the interstices and around the margins of the currently conventional and dominant global financial system, we now very importantly need protected free spaces for ecosociopsychonomic experimentation for ecosociopsychonomic innovation. This is the sum and substance of my proposals here.

In this context, we will also need systematic research into and development experimentation of financial innovations and new financial instruments for the current Global Financial System to help extend its currently indispensable service lifespan. This is because the complexity of interdependencies among the entities within the current Global Financial System have become a systemic fragility, or web of weakness and hazard, of the system itself.

The globally inter-transactive system of financial markets is itself a very large super-derivative. And it is derived from yet another derivative. This derivative is largely psycho-emotional. It is based on the system imperative for profitable financial return. It is underneath that derivative that we finally reach the underlying real asset base: the so-called “real economy:” the locus of our toil, sweat, tears, and joys. That’s the economy we live and eat. But this real economy is securitized for profitable financial returns in financial markets and that is a profound source of many of the transprudential risks we face today and will face tomorrow.

A rapid, precipitous, and overtly unanticipated and seemingly uncontrolled collapse of the Global Financial System and the World Capitalism it supports would cause mayhem in our world, or at least be attended by great dysfunctionalities. Few would want that; I certainly don’t. So: if global transitions are required, and they may be for a multiplicity of reasons, it would be better for the overarching transition to be gradual and in the context of the experimental research and development of viable living complements and alternatives, including expedients to prevent a too rapid and too cataclysmic a transition so that as one is more gently descending others are more gently ascending to provide needed life support for global human populations.

Looked at Transprudentially, Humanity and World Society is collectively taking the ultimate large existential risk of placing all its eggs in one very fragile basket: the current Global Financial System and the current World Capitalism based on it.

This is not prudential in any sense of that term. No Diversification.

Essentially, we have, as Humanity and World Society, bet everything on Capitalism.

In my view, there is an intertwining of meaning between the general concept of “Rationality” and the business quality concept of “Fit for Purpose.” Something is rational in the context of its purpose if it is fit for that purpose.

In this sense, in an intra-systemic sense, Capitalism is an extremely rational system. All of its core incentives and institutions are designed in a very rigourous and consistent manner to achieve its overarching purpose: generate profitable financial returns in a manner mitigating the intra-systemic risk to the achievement of that purpose by unloading those risks extra-systemically even at the cost of inter-systemic dysfunctionalities.

Whether or not this is rational in a Transprudential Rationality is quite another matter.

It is quite possible for a system to be Macroprudentially Rational but Transprudentially Irrational precisely because it is Macroprudentially Rational.

This same relationship exists between Microprudentiality and Macroprudentiality.

It is microprudentially rational in the short term, for example, for an investment bank to seek an accounting maximization of the return on its assets in a manner that is macroprudentially destabilizing and even dangerous.

Capitalism, in a sense, is a very large investment bank with our whole social and environmental world, in the same sense, as the financial system being put at destabilizing and dangerous risk by its behaviour which is rational in its own terms.

We are compelled to consider these possibilities.

My recommendation, counter-intuitively, is a gradual systematic divestment of Capitalism from areas beyond its system design parameters but with a corresponding investment in the development, but not the operation, of Complementary Ecosociopsychonomies in order to better manage the high potential for adverse cascading political effects on Capitalism itself if it continues to act in unawareness or denial of its own limits.

We need to open up Legally and Politically Protected Freespaces for Ecosociopsychonomic Innovation.

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Joseph Edozien

Joseph Chike Edozien II, HRH Prince Chibuike of Asaba, is the first child of Joseph Chike Edozien I, HRM King Nwanosike of Asaba, and Modupe Soboyejo Edozien, HRM Queen Obinwanyi of Asaba.

Joseph Edozien was educated at St. John’s College in the United States of America (Foundations of Mathematics) and Stanford University also in the United States of America (Artificial Intelligence).

With his theoretical, technological, and business experience in Cybernetics, he was a pioneer in the Internet business revolution. He was also a Principal at Arthur Andersen Business Consulting Global Unit heading up a global emerging technology watch organization for business solutions. He currently serves as Executive Chairman of the South African New Economics Foundation specializing in New Economic Architectures and Experimental Complementary Economies as an Economic Systems Architect specializing as a New Economy Architect.

Joseph Edozien is an American citizen of African heritage, an African-American, who considers himself to be a World Citizen.

 

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